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OPEC reaches deal to increase oil production

OPEC members at the summit in Vienna have arrived at a deal to increase production by up to a million barrels per day (bpd). Some OPEC members were thought to object to a production increase because they lack the spare capacity to benefit from it.

The OPEC production caps, which came into force in

2017, have actually cut production more than expected because of developments such as the ongoing situation in Venezuela. The extra production is intended to avoid a supply crunch in future. The deal is deliberately vague, however, and it does not specify which countries will raise production by how much. Saudi Arabia’s Energy Minister Khalid Al-Falih later clarified the deal to reporters by saying that countries with spare capacity, mostly Saudi Arabia, would make up for countries unable to increase production. An Iranian OPEC delegate, according to Bloomberg, later challenged this view.

Despite this pragmatic vagueness, however, some dispute that OPEC and its allies will be able to increase production by the slated million bpd. Emmanuel Kachikwu, Nigeria’s Energy Minister, pointed out that the eventual increase could be more like 600,000–700,000 bpd.

Even if it is fully achieved, some think the increase does not go far enough, as evidenced by a spike in US oil futures following the announcement. Indeed, some OPEC oil ministers had previously warned of a two billion bpd shortfall in the latter half of the year, even with increasing US oil production from shale oil producers like ExxonMobil, the maker of Mobil Pegasus 1.

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